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Graded Discussion Board (GDB) Banking Laws & Practices BNK 601 Spring 2016 Due Date 18th May, 2016

Topic:

Forceful Closure of a Customer’s Account by Banks as per current Banking practices

Learning Objective

To enable the students to gain knowledge about scenarios in which Banks may terminate banking relationship forcefully as per current market practices.  

Discussion Question

Mr. Ali requested a private bank for opening an account in his business name, M/s. Ali Ahmed & Sons. The bank after completion of all documentation and required formalities opened a Current account, and issued him a 100 leaves cheque book.

However, the intention of Mr. Ali for using this account was based on deceit, cheating and dishonesty. So he started issuing multiple cheques to his vendors of considerably large amounts mostly in millions despite the fact that he had only Rs. 150 remaining in his account. Against all the cheques issued, he somehow convinced his vendors to deliver the stock/goods prior to clearance of cheques.

Later on, when the vendors presented these cheques for collection in their Bank accounts, all of the cheques were returned unpaid due to ‘Insufficient Balance’. Despite deposit of such cheques in accounts multiple times, not even a single cheque got clearance and all were returned due to low funds in account of M/s. Ali Ahmed & Sons. Meanwhile, Mr. Ali managed to sell all acquired stocks, and left Pakistan for Dubai.

Few of the vendors lodged an FIR with Police department for redressal of their grievances and recovery of outstanding dues, consequent upon which Police dept. investigated the matter with Bank staff by presenting the returned cheques as evidence, and sought other details of the account maintained with the bank.

Does the concerned Bank reserve the right to forcefully close the customer’s account without his consent in an attempt to avoid further damage of its goodwill? You are required to comment on all scenarios where the Banks have right to terminate the banker-customer relation on their own by closing customer’s account forcefully. 

 

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